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Colorado exchange expects more to drop health coverage

A family nurse practitioner, gives a 2-year-old, his two-year checkup at Doctors Care as the child's mother tries to comfort him on February 13, 2014, in Littleton, Colorado. Doctors Care works with Connect for Health Colorado, to help individuals access available healthcare options. (Anya Semenoff, Denver Post file photo)

Colorado's health-care exchange is expecting nearly twice as many people to drop or decline to pay for their policies, resulting in $1 million less in revenue this fiscal year.

In April, the staff projected 13 percent of people will drop or not pay for policies in fiscal 2015, but now they are expecting about 24 percent to drop their policies, according to the latest model.

Because Connect for Health Colorado collects a fee on every policy sold through the exchange, the new model expects revenue from that fee to drop from $7.9 million to $6.9 million this fiscal year.

And in fiscal 2016, the revised figures show dropped policies going from the 16 percent projected in April to nearly 22 percent, with a nearly $740,000 drop in revenue.

Exchange chief financial officer Cammie Blais said the staff is using the higher drop rate in more recent models because that is how national figures are tracking.

The exchange has not calculated actual dropped policies for Colorado.

"We expect a much clearer picture by the end of summer," Blais said.

Dropped policies can be from people who stop paying their premiums but also from those who had a life event, such as getting a job that provides coverage.

According to the revised estimates, Connect for Health expects 35,800 of its 152,200 individuals covered with exchange policies this fiscal year to drop coverage. Next year, it expects 37,400 of 175,000 to drop.

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The exchange's new model, which was provided to the finance committee in June and used to calculate revenues in the fiscal 2015 budget by the full board approved last month, still has revenue exceeding expenses so a $1 million drop will mean less net income is added to the exchange's reserve funds. At the budget meeting, several board members expressed concerns that the exchange doesn't have enough money in reserves.

The exchange expects to have $13 million in operational reserve funds this year, according to the June financial report. Connect for Health expects total revenues of $48.9 million this year and net income of $7.2 million.

The exchange is moving from a heavy reliance on federal government grants to being self-funding. The board in June approved $13 million in new annual funding for the next two years that will be raised from a $1.25 monthly assessment on small group and individual health insurance policies in the state.

Connect for Health also collects a 1.4 percent administrative fee on its policies. The fee could rise to as high as 3 percent by fiscal 2017.

Finance committee board member Ellen Daehnick said the finance committee did not have an extended conversation about the increase in dropped policies. "The projection was based on feedback we're getting from other states," she said.

Some other states collect payments through the exchange instead of having carriers bill policy-holders directly, so the Colorado exchange staff surmises that is how it likely is getting earlier data on dropped policies.

Blais said federal rules allow people 90 days to pay before a policy is dropped, so it is too soon to tell what the impact will be in Colorado.

By 2017, the last year of the model, the drop rate projected in June is nearly identical to the April projections.

This story was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.

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